Income Mobility vs. Educational Mobility

Nobel laureate James Heckman has a new paper out with exploring social mobility in the U.S. and Denmark. The abstract reads:

This paper examines the sources of differences in social mobility between the U.S. and Denmark. Measured by income mobility, Denmark is a more mobile society, but not when measured by educational mobility. There are pronounced nonlinearities in income and educational mobility in both countries. Greater Danish income mobility is largely a consequence of redistributional tax, transfer, and wage compression policies. While Danish social policies for children produce more favorable cognitive test scores for disadvantaged children, these do not translate into more favorable educational outcomes, partly because of disincentives to acquire education arising from the redistributional policies that increase income mobility.

In short, the disadvantaged in Denmark are not flourishing and moving up financially because of the labor market, educational attainment, or careers, but simply due to wealth redistribution via high taxes.

The authors conclude,

The failure to promote greater educational mobility in spite of providing generous social services is most likely rooted in the welfare state. Our findings point to wage compression and the higher levels of welfare benefits as being counterproductive in providing incentives to pursue education. The low returns to education observed in Denmark, in particular at the lower levels of education, help explain the disconnect between the egalitarian childhood policies in Denmark and the roughly equal levels of educational mobility in Denmark and the U.S. The sorting of families into neighborhoods and schools by levels of parental advantage is likely another contributing factor. While the Danish welfare state may mitigate some childhood inequalities, substantial skill gaps still remain.

…This paper sends a cautionary note to the many enthusiasts endorsing the Scandinavian welfare state. We make no statements about the optimality and fairness of the U.S. and Danish systems from a philosophical or social choice point of view. The Danish welfare state clearly boosts the cognitive test scores of disadvantaged children compared to their U.S. counterparts. But test scores are not the whole story, or even the main story of child success, despite the emphasis on them in popular discussions. Moreover, substantial gaps in test scores remain across social groups within Denmark.

…The U.S. excels in incentivizing educational attainment. The Danish welfare state promotes cognitive skills for the disadvantaged children. Policies that combine the best features of each system would appear to have the greatest benefit for promoting intergenerational mobility in terms of both income and educational attainment (pgs. 55-56).

Check it out.